Why
should you care about understanding the economic philosophy of capitalism?

The
biggest reason is because our current situation of debt is rapidly leading
America and Americans to bankruptcy. If American voters (and Pope Francis)
understood capitalism, it is very probable we would not have had a negative
GDP the first quarter of 2014. We wouldn’t have 50 million people
out of work. Had people understood how capitalism is supposed to work,
the corruption that is so effectively leading our nation into third world
status would have been stopped in its tracks long ago. Whether people
like the idea of understanding capitalism or not, every American has an
obligation to know how the system that is supposed to fuel the economy
of our nation works. With citizenship comes responsibility.

It’s
not hard and it won’t bore you too much. It might even give you
the ammunition you need to ask intelligent questions of candidates running
for office to represent you and your interests next November. And that
is what real capitalism is all about: You and your interests.

Basically,
capitalism is an economic system where private individuals control the
means of production and provide the capital to fund production. In a capitalist
economy, parties to a transaction, not government, control and determine
prices of assets, goods and services.

We’ve
had many attempts to implement stable economic and social systems throughout
the history of the world. We’ve had monarchies – there are
many different forms of them. Some are absolute monarchies which dictate
that when a king or queen says something is the law, it becomes the law
– a lot of people say that sounds a bit like what we have in the
United States today.

Some
monarchies are democratic – a system of government in which a monarch
is guided by a constitution overseen by a legislative body elected by
the people to represent their interests. There are also Commonwealths
and Principalities and other monarchic forms of government.

Monarchies
were preceded by feudalism which also lasted for hundreds of years. Feudalism
was a system in which society was structured on the basis of holding land
in exchange for service or labor… most people were serfs or peasants
who had no rights other than those granted them by the owner of the land
they farmed and to which they belonged. They were part of the land. If
it was sold, the serfs were sold with the land.

A “Federal”
government is usually referred to as a “Federation” –
as the Russian Federation is known today. In a Federation, sovereign power
is formally divided between a central authority and numerous regions (states,
colonies, or provinces). In that way, each region keeps some form of control
over its internal affairs. The central government has influence on both
individuals and the regions within the Federation.

A Constitutional
form of government functions under a constitution which provides the system
with basic laws and principles under which society and the government
will function.

A Republic
is where the people elect members from the public to represent them and
vote on legislation.

Thus,
a Constitutional Republic like the United States of America functions
under a Constitution from which the rule of law flows telling society
and government what the rules are – especially restrictions that
are placed on government – and the people elect members from the
public to represent them in upholding the law of the land as stated by
the Constitution and to pass legislation in compliance with it.

In essence,
the poverty class moved from being slaves to being serfs (with ties to
the land under feudalism) to being servants (with no ties to the land
on which they lived) and from servants they became labor. The industrial
revolution ushered in large companies who hired not servants, but employees
(and later, unions, of course).

Capitalism
is based on individualism – it still is to those who understand
how it is really supposed to work. Only an individual is capable of making
decisions about what best suits his or her desires of self-interest –
and self-interest is the basis of capitalism according to the guy who
created the concept.

Just
as communism is about the state owning property and the means of production
– and socialism mimics it pretty closely in that regard –
capitalism is about individual ownership of property and the means of
production. Capitalism puts the private sector in charge of financing
property and production, not the public/government sector. Had We the
People understood that, perhaps we could have prevented the unlawful foreclosure
on the homes of millions of Americans which have occurred since the 2007
financial “crisis.” Though government has an obligation to
enforce the law (which it does not do today), We the People have an obligation
to understand the laws (which most do not) so we can stop abuses when
they occur. If we don’t take care of our obligation, we do not have
the means to force politicians to take care of theirs.

The
father of capitalism is Adam Smith. In 1776, Smith published a book called
Wealth of Nations. In that book, Smith pointed out that individuals who
serve their own self-interest rather than serving the interests of someone
else will productively seek economic activities that give them the greatest
personal rather than the smallest reward. Adam Smith believed that if
people worked for themselves – chose their own careers and endeavors
– their self-interests would benefit everyone. When given the freedom
to invest their labor so it benefitted them rather than just enriching
wealthy others, it would maximize the wealth of the labor class and because
huge numbers of people would be involved in the process it would also
benefit the wealth of the entire nation. Such people, Smith said, would
create a “wealth of nations” – and that’s why
the title of his book is Wealth of Nations. It is this concept
that built the Middle Class which is under attack – as are the economic
rules of capitalism. They are using a prostituted concept of capitalism
to destroy the Middle Class and independent business. That’s why
it’s important for you to know these things!

The
year 1776 will sound familiar to most Americans who have studied our history.
It was during this time we began, fought and won the Revolutionary War
and freed America – theoretically, at least – from the slavery
associated with royalty. No longer would what the English viewed as a
benevolent dictator – a king or queen who ruled the lands Britain
perceived it had the right to own – no longer would a king or queen
in a foreign land tell American citizens how much they would have to pay
for tea or for stamps for their letters. No longer would British royalty
tell Americans how much they owed in taxes of every kind. We now elect
our own government to make these demands on us. We no longer have slavery
associated with royalty. Rather, we have slavery associated with debt
– a debt placed upon our backs by those we elected to serve us.

The
Constitution was signed on September 17, 1787 – and the Founding
Fathers immediately had a problem. How were they going to pay for the
things people need – roads, modes of transportation, bridges, sanitation,
etc.?

The
Founders studied what Adam Smith said in Wealth of Nations
– and they studied another of his books which preceded it, called
The Theory of Moral Sentiments. In this book, Smith considered
man’s ability to make moral judgments. It was from this base, he
believed, that humans have a natural tendency that makes them seek their
own well-being. The ideas of Adam Smith were radical when compared to
the economic philosophies of the time – primarily mercantilism.
Wealth of Nations is yet today considered the most important
economic work written – yes, even more important than the works
of Karl Marx (my apologies to the liberal communists reading this). Smith’s
philosophy encompassed the values of individualism; Marx’s philosophies
encompassed the values of the collective.

What
needed to be done to stimulate the economy of the new nation called America?

Roads
had to be built, canals had to be dug – why? So commerce could grow
and expand and so the economy could thrive. The fight between government
subsidies versus private capital began with George Washington when Alexander
Hamilton, Washington’s Treasury Secretary, told the first President
of the United States of America that government subsidies would be needed
if commerce was going to expand.

Some
things never change, do they? We hear precisely the same thing today.
Yet, most of the markets which made capital – money – available
to build thousands of miles of private roads without government came from
the private, not the public, sector and they thrived. When government
got involved in building the roads, the same thing happened then as happens
now… it was a financial disaster.

Government
involvement in the private sector (where it does not belong) has today
morphed into what we call “crony capitalism.” What does it
mean when that term, crony capitalism, is used?

Let’s
use a recent example of it – ObamaCare. What is the most provable
and the best-known failure of ObamaCare? The failure of the enrollment
Website. It’s a perfect example of crony capitalism.

Were
any American companies considered for the contract to build the ObamaCare
Website? No one has been able to find one. In fact, no one has been able
to find anyone who was seriously considered other than CGI Federal who
was given a no-bid contract for $93 million of software and Web site development.
A top executive at CGI Federal was Michelle Obama’s crony –
oops, I mean classmate at Princeton.

Prior
to being given this plum no-bid contract by the Obama Administration to
build the ObamaCare Website, what experience did CGI have to qualify it
for the confidence a no bid contract places in any vendor? It had built
a gun registry for the Canadian government – and was fired by the
government for cost overruns exceeding $100 million. CGI leaned on its
experience – cost overruns. The original $93 million contract ended
up costing U.S. taxpayers $678 million (plus – we still don’t
have the final bill and to undo the mess made by CGI and to get a workable
enrollment Web site up and running, another company had to be hired to
do that, so more wasted money).

There
is crony capitalism, there is social capitalism, welfare capitalism (both
are better called socialism), state capitalism (better called crony capitalism),
and laissez-faire capitalism. Laissez-faire capitalism is dependent upon
transactions between individuals free from government restrictions, tariffs,
subsidies, and minimum regulations. The term is French and (very) broadly
means “let it be.” Based on comments about capitalism made
by Pope Francis, it seems his South American background makes him think
capitalism is what I would term state or crony capitalism. That, Your
Holiness, is not capitalism.

Another
example: Federal Reserve Chairman Janet Yellen said she doesn’t
see a bubble in the immediate future. Hmmm… Last year, the market
rose 35% and had 20 all-time highs. Our first quarter GDP was a negative
(certainly not performance designed for a 35% increase and 20 all-time
highs) and somehow in Yellen’s mind there isn’t a bubble?
If this isn’t an example of market manipulation by a group of crooks,
I don’t know what is. Anyone who doesn’t see a manufactured
result in those numbers just isn’t looking. Get ready for real time
inflation, folks, because that’s what’s coming. Though the
Federal Reserve System is not a government entity, it does determine economic
policy for the federal government.

America
is no longer a manufacturing nation. When President Clinton signed the
NAFTA agreement in 1994, he cost the manufacturing sector 1,500 jobs –
that’s the official number but it is much higher than that. And
government’s fixation on no oil, no coal and pushing green energy
is not only costing jobs, it is costing the economy dearly. It is part
of the reason our Gross Domestic Product (GDP) fell 1 percent during first
quarter 2014 registering a minus growth factor. Benghazi cost American
lives (as did the Iraq war with territory now being re-taken by terrorists…
so much wasted blood). The IRS and immigration scandals result in perhaps
the worst cost – a cost so dear that once lost it will take generations
to regain the people’s trust. All of these scandals are the result
of crony capitalism – or state capitalism.

Capitalism
is a system dependent for its success on free markets (which we have not
enjoyed in this nation for many years). The reason capitalism no longer
works as the driving force of the American economy is because private
sector competition, capital and creativity have been replaced by political
cronyism.

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As a
concept, capitalism is still alive and quite well. What has failed is
the character of our politicians and the people they were elected to serve.
If we “let it be” as laissez-faire suggests – if we
have a laissez-faire attitude towards our political system – we
will lose our Republic and we may never get it back again.

Politicians
serve themselves, not us. To re-elect to office any serving politician
is to fulfill Einstein’s theory that to do the same thing repetitively
and expect a different outcome defines insanity.

Marilyn
MacGruder Barnewall began her career in 1956 as a journalist with the
Wyoming Eagle in Cheyenne. During her 20 years (plus) as a banker and
bank consultant, she wrote extensively for The American Banker, Bank Marketing
Magazine, Trust Marketing Magazine, was U.S. Consulting Editor for Private
Banker International (London/Dublin), and other major banking industry
publications. She has written seven non-fiction books about banking and
taught private banking at Colorado University for the American Bankers
Association. She has authored seven banking books, one dog book, and two
works of fiction (about banking, of course). She has served on numerous
Boards in her community.

Barnewall
is the former editor of The National Peace Officer Magazine and as a journalist
has written guest editorials for the Denver Post, Rocky Mountain News
and Newsweek, among others. On the Internet, she has written for News
With Views, World Net Daily, Canada Free Press, Christian Business Daily,
Business Reform, and others. She has been quoted in Time, Forbes, Wall
Street Journal and other national and international publications. She
can be found in Who's Who in America, Who's Who of American Women, Who's
Who in Finance and Business, and Who's Who in the World.

America
is no longer a manufacturing nation. When President Clinton signed the
NAFTA agreement in 1994, he cost the manufacturing sector 1,500 jobs –
that’s the official number but it is much higher than that.